Odey Asset Management has revealed to clients that it took a short position against Deliveroo, the first sign that hedge funds are targeting the food delivery company after last month’s disastrous initial public offering.
The bet against Deliveroo’s share price was taken by James Hanbury and Jamie Grimston, fund managers at London-based Odey, according to investor documents seen by the Financial Times. The position appears to have been taken on March 31, the day of Deliveroo’s listing.
The revelation about Odey’s position comes after advisers working on Deliveroo’s flotation at the end of last month blamed short sellers — funds that borrow stock and sell it in the hope of profiting from a falling share price — for contributing to the firm’s more than 30 per cent drop on the morning of its IPO.
Advisers said at least three hedge funds had taken an early short position immediately after the float, in what one banker described as “the worst IPO in London’s history”.
The size of Odey’s position is unclear. However, it has not been disclosed in regulatory filings and is therefore likely to be below the 0.5 per cent disclosure threshold, making it probably too small in isolation to account for the poor performance of Deliveroo’s shares since their launch. Odey, which has not revealed the reasons for its position, declined to comment.
Data earlier this month showed very low levels of shorting in the days following the Deliveroo flotation, with negligible amounts of stock lending on March 31 itself. It could still be possible for some funds to source shares to short outside of the securities lending market, however.
Despite a brief rally last week, Deliveroo’s shares have largely headed south since its IPO and are now down about 40 per cent from their listing price, which was already at the bottom of the IPO target range.
Last week the company said food order volumes more than doubled to 71m in the first quarter of 2021 while its active customer base rose 91 per cent, although chief executive Will Shu admitted he had “a lot of work ahead” to win over investors. Deliveroo said it did not comment on individual investment positions.
Hanbury and Grimston wrote in the investor documentation that markets are in an “extreme environment”. Low interest rates, rampant retail investing, a post-Covid boost to certain stocks and a “box ticking” approach to sustainability have “created some bubble valuations”.
Their Brook Absolute Return fund gained about 29 per cent last year and is up about 7.3 per cent this year, helped by positions in stocks such as National Express and ArcelorMittal, according to the investor documents.
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